In a move reminiscent of the kind of bold, audacious gambit his father, Pierre Elliott, was once known for, Prime Minister Justin Trudeau just nationalized a pipeline. It represents the biggest gamble of his political life.
Pipelines have, in many ways, divided this country. And so it will be that the federal government’s $4.5-billion decision to buy the existing Kinder Morgan Trans Mountain pipeline – and seize control of building a planned expansion - will be polarizing. But as risky as it seems from virtually any angle, Mr. Trudeau’s Liberals had, in many ways, no choice.
Kinder Morgan, a firm with an established reputation for getting difficult projects built, was preparing to walk away from this one. The damage that would have done to international investor confidence in Canada would have been immeasurable. The federal government had to step into the breach or risk becoming a laughingstock, cowed both by environmentalists and a B.C. government challenging its constitutional authority.
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But anything Mr. Trudeau and his government stand to gain by forging ahead with the pipeline expansion will have to be measured against significant political losses. And they’re still being tallied up.
Environmentalists who once applauded Mr. Trudeau and his enthusiastic embrace of the Paris climate targets feel deceived. Celebrity crusader Naomi Klein promised the PM on Twitter his decision would “haunt him” everywhere he travels now. He was called a climate fraud by influential activist Bill McKibben. That sound you hear is votes running toward the NDP and Greens.
Many Canadians will not be thrilled about becoming investors in a pipeline. Recent polls showed that nowhere was opposition to this idea higher than in B.C., where it was running 70-per-cent against. This, in a key battleground province for the Liberals come the next election. Indigenous leaders who have vowed to stop the pipeline expansion from proceeding also feel betrayed by a federal leader who promised a new era of consultation and reconciliation.
In one fell swoop, the federal Liberals likely just saw tens of thousands of votes walk out the door.
Sure, the controversial acquisition was applauded in Alberta. It’s doubtful, however, that it is an investment that will pay off for the Liberals come the next election.
Alberta Premier Rachel Notley is thrilled. All that was missing at her news conference on Tuesday was former U.S. president George W. Bush’s “Mission Accomplished” banner. “Pick up those tools, folks, we have a pipeline to build,” the Premier extolled. Even though her declaration of victory might have been a tad premature, Ms. Notley couldn’t stop smiling. And why not? Her fights with B.C. are over. No more threats to strangle petroleum supplies to the province. It’s now strictly a battle between Ottawa and the Left Coast.
For his part, B.C. Premier John Horgan seemed unmoved by the whole affair. The province will proceed with its reference case to the B.C. Court of Appeal, seeking the authority to control what substances flow through any new pipeline traversing the province. However, given a Crown corporation now owns the project, B.C.’s case is likely even flimsier than it was already. Right now, the one thing that could stall the approved expansion further would be a negative decision from the federal Court of Appeal, expected to render a verdict soon in a raft of anti-pipeline lawsuits being handled at once.
The $4.5-billion purchase price does not include construction costs of the Trans Mountain expansion. The fact that the government refuses to say how much it will be is worrisome. As investors, we should demand to know. Kinder Morgan had pegged the cost at $7.4-billion, but this newspaper recently reported the project was already running over budget. So how much, over all, are Canadian taxpayers on the hook for potentially? Is it $12-, $13-, $14-billion?
The government’s chance of finding a private investor to buy the project before the end of summer is unlikely. The threat of lengthy, potentially violent protests and the impact that had on creating a reliable construction timetable is one of the reasons Kinder Morgan wanted out. Any new investor is going to wait until Ottawa gets most of the dirty work done, gets the project built through the most contentious areas of B.C., before feeling comfortable enough to take it on.
In some respects, buying a pipeline was the easy part. Getting a new one built against formidable opposition is where things get difficult. We’re about to find out if Mr. Trudeau and his government have the stomach for it.